Why should you budget?

Help to manage to your money. Help to plan for your future. Ensures that you are able to make

ends meet.

What’s budgeting?

Establishing a planned level of expenditures, usually at a fairly detailed level.

The goal:

Income > Expenses.

Expenditure: an amount of money that is spent on something

Budgets can be a real…

Balancing Act!

Wants and Needs

WANTS NEEDS Going out to eat Movies Buying clothes when

you don’t need them Cell Phone rings Texting Cable TV Computer

Rent Mortgage Utility Bills Food Basic Clothing Cell Phone Savings

Types of Income…

Earned-wages or salaries paid (earned) for your job.

Unearned-Income received that is not a result of your job. Examples: Interest, dividends from stock, birthday money, etc.

Types of Expenses:

Fixed- Cannot be easily changed. Remain essentially the same from month to

month. Examples: Rent, Utility bills, car payment,

etc. Variable:

Can be controlled. Change from month to month Examples: Entertainment, Food, Clothing

What We Don’t Want to Happen... What happens if we spend more than

we make? Loss or Debt:

Expenses are greater than revenue How that happens:

Spending too much on entertainment Spending money on wants not needs Not budgeting correctly!

Rank These Expenses In Order: Highest to Lowest Student Loan Telephone Entertainment Transportation Mortgage/Utilities Clothing/Personal Care Food Household Supplies Medicine/ Health Supplies Savings

Sample pie chart of expenses

Always Be Prepared!

Emergency Fund money placed in savings to provide for

unpredictable expenses such as medical bills, repairs, or loss of income

Having the emergency fund is a great way to put your mind at ease

Forecasting creating a long term budget covering 3

to 5 years

What We DO Want to Happen… What do we make if we have more money

coming in that going out? Profit: When revenue is greater than expenses Revenue: a term used to describe money that is

earned and received, or will be received How that happens:

Spending more money on NEEDS than on WANTS Sticking to your BUDGET!

How Do We Keep Track of Our Budget? Envelope System: store the

cash to meet separate categories of household expenses in physically separate envelopes

Budget Sheet: a sheet used to estimate revenue and expenses

Envelope System

Budget Sheet

Three More Kinds of Income

Gross Income: your earned income BEFORE taxes

Net Income: your earned income AFTER taxes

Discretionary Income: money remaining after all bills are paid off. It is income after subtracting taxes and normal expenses.